RBC remains 'cautious' on Bunzl, lowers target price

RBC Capital said whilst the stock had underperformed of late, other than mergers and acquisitions, it sees few catalysts. However, it stated that the net result was that 2020 forecasts went up, with a bigger Covid-19 product benefit than originally thought, although its previously sub-consensus 2021 forecasts came down 1%.

The Canadian bank said comparatives were "tough" on a relative basis going into 2021 and also noted that the macro environment was likely to remain "weak" in some of Bunzl's end markets.

"With valuation relatively unattractive and with organic growth likely harder to come by going forward, we believe sentiment and momentum will likely remain muted," said the analysts.

RBC also pointed out that M&A opportunities should continue to emerge over time and would also remain "crucial" to the investment story, given its view that longer-term growth and margins remained under "some structural and mix pressures".

"We continue to be cautious and remain at 'underperform', believing there are better defensive growth stocks in the sector and within the distributors specifically," concluded RBC.